Key Wholesale Drivers

1. Very large natural gas storage withdrawals are coming up in the next few weeks hitting U.S. natural gas storage hard
2. The Greenland Ridge and Alaskan Ridge are combing with a split Polar Vortex in sending extreme cold into the U.S. for possibly weeks
3. December and January showed a bump up in U.S natural gas supply, but was it a false indicator?  Yes.
4. Will the U.S. exit winter with a storage deficit compared to the past 5 year average?  The odds are very good
5. Will U.S. production be high enough this summer to meet global and domestic demand as well as refill storage completely by next winter?

Commentary

When we look back at the winter of 2020/2021 we are likely to ask ourselves “what just happened?”  Heading into winter we knew we had a strengthening La Nina, meaning the jet stream would probably give the Midwest and Northeast a better chance to have normal winter temperatures on average and more snow than last winter.  In January a sudden stratospheric warming event occurred splitting the Polar Vortex.  While Europe, Asia and Siberia experienced extreme cold, U.S forecasters stayed busy with a will it or won’t it show up in the Midwest and Northeast?  The extreme cold didn’t spill over into the U.S in January as it was expected helping us look to more warming and maybe an early spring.  Just a week ago we saw new February forecasts predicting above normal temperatures for the eastern half of the U.S.   However, Punxsutawney Phil knew better when he saw his shadow.  Suddenly all the weather variable pieces fell into place: a high pressure ridge over Alaska,  a high pressure ridge over Greenland, and a continuing distorted Polar Vortex is combining to allow the artic cold to spill into the U.S with extremely cold temperatures.  During the first half of February we will likely experience the coldest temperatures of the year, the highest draws from U.S natural gas storage and the most well freeze offs we’ve seen in quite some time.  Obviously NYMEX has jumped up and could easily continue up if the withdrawals from storage results in year-end storage levels moving into a deficit position.  How much the storage deficit grows by the end of winter is important.  Will U.S natural gas production be enough to meet strong domestic and global demand and be able to fill storage to adequate levels by winter?

Another very important happening began February 1, 2021.  The Federal Energy Regulatory Commission recently approved Columbia Gas Transmission’s request to recoup $3 billion for capital and operational expenses.  This increase means all consumers behind Columbia Gas of Ohio will see price increases on their supplier bills as part of a regulatory pass through.  For Columbia Gas of Ohio consumers paying the monthly variable rate the new adder beginning April 1 will go up $.63/mcf or $.063/ccf.  This increase in the Columbia Gas of Ohio adder helps demonstrate the size of the increase Columbia Transmission requested and was approved.  We’ve seen new fixed price quotes for Columbia Gas of Ohio customers with the new upstream transport costs included rise around $.05/ccf.  For example, a quote that was previously $.416/ccf is now $.466/ccf. When your business takes fixed price natural gas quotes, you want to make sure the new higher transport rates are included in the quotes from all the supplier offers so you don’t have sticker shock when the bill arrives.

Please feel free to contact us to learn more about how the wholesale market volatility can affect your business’ electric and natural gas offers or if you have additional questions about how the transportation rate increase approved by FERC will effect your billed price.  While we don’t have any customer specific details yet about how the FERC approved increase will effect each client, we would be happy to discuss it and explain it more in depth.  As an energy broker RD Energy uses its strong electric and natural gas supplier portfolio to  shop for the lowest unbiased prices for our clients.  We also help those customers that qualify with value added programs like Peak Load Management and Demand Response as well as help clients meet sustainability goals with carbon free or green supplies.  Wish you could replace your lights with LED and finance it over the term of your electric supplier agreement?  RD Energy can help evaluate, manage and arrange a program like that as well for your company.  We work every day to bring value and a lower energy spend to your business.